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Monday, July 08, 2019

TODAY’S STUDY: Solar’s Record-Breaking Start To 2019

June 18, 2019 (Solar Energy Industries Association and Wood Mackenzie Power and Renewables)

Key Figures

In Q1 2019, the U.S. solar market surpassed 2 million installations – just three years after the market surpassed the 1 million installation milestone. The industry is expected to hit 3 million installations in 2021 and 4 million installations in 2023.

In Q1 2019, the U.S. solar market installed 2.7 GWdc of solar PV, marking the largest Q1 ever recorded. This represented a 37% decline from Q4 2018 and a 10% increase from Q1 2018.

Residential solar continues its modest rebound, with a third consecutive quarter of more than 600 MWdc of installed capacity.

There were 1.6 GWdc of utility-scale solar installed in Q1 2019, accounting for 61% of U.S. capacity additions this quarter.

Wood Mackenzie forecasts 25% growth in 2019 compared to 2018, with more than 13 GWdc of installations expected.

Total installed U.S. PV capacity will more than double over the next five years, with annual installations reaching 16.4 GWdc in 2021 prior to the expiration of the residential federal Investment Tax Credit (ITC) and a drop in the commercial tax credit to 10% for projects not yet under construction.

In Q1 2019, the U.S. solar market installed 2.7 gigawatts direct current (GWdc) of solar photovoltaic (PV) capacity, a 10% increase year-over-year and the strongest Q1 in the industry’s history. After a year in which the residential sector grew 8%, the rebound continued, with the sector experiencing a third consecutive quarter with more than 600 MWdc added. Conversely, non-residential PV suffered both quarterly and annual declines due to policy transitions and interconnection issues in key markets. The quarter was buoyed by 1.6 GW of utility-scale installations, with new project procurement growing the contracted pipeline to nearly 28 GW. Across all market segments, solar PV accounted for 51% of all new electricity generating capacity additions in Q1 2019. Further, solar surpassed the 2 million installation milestone in Q1 2019, after reaching the first million just three years ago in 2016.

Residential solar continues rebound in a strong first quarter

After growing 8 percent in 2018, the residential solar market grew 5% on a year-over-year basis and is effectively tied for the second-largest quarter since Q4 2016. Since bottoming out in Q3 2017, quarterly growth in five of the last six quarters suggests that the market is adopting a more sustainable growth profile, with a mix of local and regional installers operating alongside national installers. However, state markets with higher penetration levels and increasing customer-acquisition costs continue to struggle with flat or declining installations on a quarterly basis. The continued emergence of new markets has helped to sustain robust installation volumes nationally.

Non-residential PV continues to struggle, entering a second consecutive year of annual decline

Unlike the residential market, a handful of state-specific regulatory cliffs and policy reforms that took effect in 2018 continued to impact non-residential installations in Q1 2019. Major policy reforms in the core non-residential markets of California and Massachusetts are still hampering development. In the case of California, installations were flat on both a year-over-year and quarter-over-quarter basis, which suggests that installation declines stemming from the transition to new time-of-use rates may be abating. Massachusetts is still being negatively impacted by the transition to its new incentive program, which has slowed most non-residential development. As the state transitions to the new SMART program, utility interconnection approvals for qualified projects are taking much longer than anticipated, leaving most projects waiting months, if not years, to interconnect and begin earning SMART tariff revenue. This has resulted in market declines on both a year-over-year and quarter-over-quarter basis.

Utility PV maintained the largest share of installations in the U.S. solar market this quarter – 1.6 GWdc of utility PV capacity came online in Q1 2019, representing 61% of quarterly capacity additions. With 4.7 GWdc of projects under construction, 2019 is on track to be a strong year for utility PV, with 46% growth over 2018 expected.

After a record 15.0 GWdc of U.S. utility solar was procured in 2018, new project announcements have slowed slightly in 2019 but levels still remain healthy. As of May 2019, 3.8 GW have been procured, pushing the contracted pipeline to 27.7 GW. The growth is primarily due to a 1.5 GWdc announcement from Florida Power & Light and 1.1 GWdc announced by Duke Energy in the Carolinas. Florida Power & Light’s development of its own solar projects makes up the bulk of Florida’s five-year forecast, with additional announcements from Duke Florida, Teco Energy and Jacksonville Electric expected to add to the pipeline in that state.

Voluntary procurement of utility PV based on its economic competitiveness continues to be the primary driver of projects announced in 2019. While many states, utilities and cities have announced or proposed 50% or 100% renewable energy or zero-carbon standards, the announcements have not yet resulted in an uptick in RPS-driven procurement. Corporate procurement of utility solar drove 22% of projects announced in 2018 and continues apace in 2019, with 14% of projects announced having a corporate offtaker. (Wood Mackenzie classifies large offsite projects with C&I offtakers as utility-scale rather than distributed due to the size and structure of the deals.) As the number of corporations pledging to use 100% renewable power continues to grow, corporate procurement is expected to remain a strong driver of utility PV.

Despite steady installations in Q1 2019, the residential market is still highly reliant on legacy state markets, such as California and the Northeast, which have seen only modest to flat growth over the past several quarters. As these major state markets continue to grow past early-adopter consumers, higher costs of customer acquisition will challenge the industry to innovate product offerings and diversify geographically. Indeed, 29% of residential capacity in Q1 2019 came from markets outside the top 10 (by cumulative capacity), the highest share for emerging markets in industry history.

From 2019-2021, residential growth will range from 5%-20% due to both emerging markets with strong resource fundamentals like Florida and Texas, and markets where recent policy developments have increased our near-term forecasts. Maryland’s recent renewable portfolio standard increase, the removal of South Carolina’s net metering cap, and new incentive programs such as Illinois’ Adjustable Block Program will provide significant upside and growth to our residential forecasts over the next few years. Meanwhile, California’s new home solar mandate will also help to offset market penetration challenges beginning in 2020.

In the long term, the ITC step-down is expected to pull in demand in both legacy and emerging markets before declining in 2022. Growth resumes in 2023 and continues into 2024 based on economic fundamentals as the market adjusts to post-ITC market conditions. That said, long-term growth in a post-ITC world will be contingent on geographic diversification outside of legacy state markets and technological/business-model innovation to improve product offerings in solar-plus-storage.

Non-residential installation totals in Q1 2019 were the weakest since Q1 2017 as all three major state markets (California, Massachusetts and Minnesota) saw declining volumes due to state-level policy reforms and interconnection delays that continue to limit development opportunities. Overall, the non-residential PV market is on track for another down year as the segment acclimates to a reduced incentive environment across major state markets. However, this will be incrementally offset starting in 2020 as the next wave of states with robust community solar mandates – New York, Maryland, Illinois and New Jersey – experience growth.

Furthermore, recent policy developments in New York and Maryland will ultimately provide for growth in our long-term outlook. Significant revisions to the Value of Distributed Energy Resources (VDER) docket in New York have bolstered our long-term forecasts for both commercial and community solar, while an RPS increase in Maryland will boost the sagging SREC market to the benefit of the entire non-residential segment.
Increasing solar-plus-storage viability will also begin to have an impact on non-residential demand as policymakers and business leaders increasingly consider energy storage in their decisions. New York’s recent development of the Bridge Incentive increases our long-term solar-plus-storage forecasts with further potential upside. By 2023, roughly 30% of total non-residential PV will come from community solar, and ~20% will come from solar-plus-storage projects.

The U.S. utility solar forecast for 2019-2024 has grown by 5.1 GWdc since last quarter. The largest contributor is an increase to Florida’s five-year outlook from 6.0 GWdc to 9.0 GWdc due to new solar procurement by Florida Power & Light (FPL), Duke Energy Florida, and other Florida utilities (most of which is utility self-build). This positions Florida to be the top state for utility PV over the next six years.

Since last quarter, the 2019 forecast has grown by 1.2 GW, due largely to late project announcements in Texas that raised the state’s forecast by 720 MWdc. While the forecast for 2020 saw little change to overall expected capacity additions, over 10.0 GWdc of utility PV are still expected to come online that year. From 2021-2023, our utility PV forecast has increased by 2.8 GWdc. While the bulk of this increase is found in Florida, there are a growing number of utilities such as Xcel Energy, Idaho Power and PacifiCorp, among others, announcing additional solar procurement, expedited coal plant retirement, or plans to achieve 50% to 100% renewable or carbon-free energy targets, all of which have boosted the midterm forecast.

During this time, utility PV also becomes increasingly competitive with wind. As the wind-focused federal Production Tax Credit steps down, solar begins to fall below the cost of wind on a levelized cost of energy (LCOE) basis in many traditional wind states such as Illinois, Iowa, Kansas, Michigan and the Dakotas by the mid-2020s. (Wood Mackenzie’s LCOE calculations for solar take the ITC incentive into account.) This is likely not only to drive more solar procurement in wind-dominant regions of Midcontinent Independent System Operator and Southwest Power Pool, but also to make solar the preferred renewable technology for corporate offtakers. Oklahoma Gas & Electric’s recent RFP for solar-plus-storage is the first example of what is likely to be a trend in solar procurement in the Prairies and Midwest.

Our 2024 forecast has also increased by 1.1 GWdc. Many utilities such as Dominion, Tennessee Valley Authority and FPL have outlined solar procurement plans for 2024 and beyond. Despite the ITC having fully stepped down to 10% by that time, utility PV will remain economically competitive with new-build wind and natural gas in many places.

Review of OIL IN THEIR BLOOD, The American Decades by Mark S. Friedman

OIL IN THEIR BLOOD, The American Decades, the second volume of Herman K. Trabish’s retelling of oil’s history in fiction, picks up where the first book in the series, OIL IN THEIR BLOOD, The Story of Our Addiction, left off. The new book is an engrossing, informative and entertaining tale of the Roaring 20s, World War II and the Cold War. You don’t have to know anything about the first historical fiction’s adventures set between the Civil War, when oil became a major commodity, and World War I, when it became a vital commodity, to enjoy this new chronicle of the U.S. emergence as a world superpower and a world oil power.

As the new book opens, Lefash, a minor character in the first book, witnesses the role Big Oil played in designing the post-Great War world at the Paris Peace Conference of 1919. Unjustly implicated in a murder perpetrated by Big Oil agents, LeFash takes the name Livingstone and flees to the U.S. to clear himself. Livingstone’s quest leads him through Babe Ruth’s New York City and Al Capone’s Chicago into oil boom Oklahoma. Stymied by oil and circumstance, Livingstone marries, has a son and eventually, surprisingly, resolves his grievances with the murderer and with oil.

In the new novel’s second episode the oil-and-auto-industry dynasty from the first book re-emerges in the charismatic person of Victoria Wade Bridger, “the woman everybody loved.” Victoria meets Saudi dynasty founder Ibn Saud, spies for the State Department in the Vichy embassy in Washington, D.C., and – for profound and moving personal reasons – accepts a mission into the heart of Nazi-occupied Eastern Europe. Underlying all Victoria’s travels is the struggle between the allies and axis for control of the crucial oil resources that drove World War II.

As the Cold War begins, the novel’s third episode recounts the historic 1951 moment when Britain’s MI-6 handed off its operations in Iran to the CIA, marking the end to Britain’s dark manipulations and the beginning of the same work by the CIA. But in Trabish’s telling, the covert overthrow of Mossadeq in favor of the ill-fated Shah becomes a compelling romance and a melodramatic homage to the iconic “Casablanca” of Bogart and Bergman.

Monty Livingstone, veteran of an oil field youth, European WWII combat and a star-crossed post-war Berlin affair with a Russian female soldier, comes to 1951 Iran working for a U.S. oil company. He re-encounters his lost Russian love, now a Soviet agent helping prop up Mossadeq and extend Mother Russia’s Iranian oil ambitions. The reunited lovers are caught in a web of political, religious and Cold War forces until oil and power merge to restore the Shah to his future fate. The romance ends satisfyingly, America and the Soviet Union are the only forces left on the world stage and ambiguity is resolved with the answer so many of Trabish’s characters ultimately turn to: Oil.

Commenting on a recent National Petroleum Council report calling for government subsidies of the fossil fuels industries, a distinguished scholar said, “It appears that the whole report buys these dubious arguments that the consumer of energy is somehow stupid about energy…” Trabish’s great and important accomplishment is that you cannot read his emotionally engaging and informative tall tales and remain that stupid energy consumer. With our world rushing headlong toward Peak Oil and epic climate change, the OIL IN THEIR BLOOD series is a timely service as well as a consummate literary performance.

Review of OIL IN THEIR BLOOD, The Story of Our Addiction by Mark S. Friedman

"...ours is a culture of energy illiterates." (Paul Roberts, THE END OF OIL)

OIL IN THEIR BLOOD, a superb new historical fiction by Herman K. Trabish, addresses our energy illiteracy by putting the development of our addiction into a story about real people, giving readers a chance to think about how our addiction happened. Trabish's style is fine, straightforward storytelling and he tells his stories through his characters.

The book is the answer an oil family's matriarch gives to an interviewer who asks her to pass judgment on the industry. Like history itself, it is easier to tell stories about the oil industry than to judge it. She and Trabish let readers come to their own conclusions.

She begins by telling the story of her parents in post-Civil War western Pennsylvania, when oil became big business. This part of the story is like a John Ford western and its characters are classic American melodramatic heroes, heroines and villains.

In Part II, the matriarch tells the tragic story of the second generation and reveals how she came to be part of the tales. We see oil become an international commodity, traded on Wall Street and sought from London to Baku to Mesopotamia to Borneo. A baseball subplot compares the growth of the oil business to the growth of baseball, a fascinating reflection of our current president's personal career.

There is an unforgettable image near the center of the story: International oil entrepreneurs talk on a Baku street. This is Trabish at his best, portraying good men doing bad and bad men doing good, all laying plans for wealth and power in the muddy, oily alley of a tiny ancient town in the middle of everywhere. Because Part I was about triumphant American heroes, the tragedy here is entirely unexpected, despite Trabish's repeated allusions to other stories (Casey At The Bat, Hamlet) that do not end well.

In the final section, World War I looms. Baseball takes a back seat to early auto racing and oil-fueled modernity explodes. Love struggles with lust. A cavalry troop collides with an army truck. Here, Trabish has more than tragedy in mind. His lonely, confused young protagonist moves through the horrible destruction of the Romanian oilfields only to suffer worse and worse horrors, until--unexpectedly--he finds something, something a reviewer cannot reveal. Finally, the question of oil must be settled, so the oil industry comes back into the story in a way that is beyond good and bad, beyond melodrama and tragedy.

Along the way, Trabish gives readers a greater awareness of oil and how we became addicted to it. Awareness, Paul Roberts said in THE END OF OIL, "...may be the first tentative step toward building a more sustainable energy economy. Or it may simply mean that when our energy system does begin to fail, and we begin to lose everything that energy once supplied, we won't be so surprised."

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